Old king coal

SA remains above all a mining nation that relies on mineral resources as the lifeblood of its economy. On the first tier of mineral production we are the world’s leading producer of platinum, vanadium, vermiculite, manganese and chromium. On the second tier we are the second-largest producer of ilmenite, industrial garnet, palladium, rutile and zirconium. And on the third tier we are the third-largest coal producer and exporter, and a large producer of iron ore.

A minerals-energy complex has developed in the country that encapsulates a set of national activities organised in and around the energy and mining sectors and associated sub-sectors of manufacturing.

Our economy has benefited greatly from the exploitation of its rich domestic coal reserves, upon which it based its electricity production. At the core of our mining-energy complex is cheap power, which has been the bedrock of our relative economic successes. Globally, coal remains an enduring fossil fuel the world has relied on as a source of energy since the first industrial revolution.

By 2017 coal accounted for 28% of the global primary energy supply — and it remains the largest source of CO² emissions. As the world becomes conscious of climate change and its adverse effects on livelihoods, attention has shifted to the underlying causes of global warming — with coal the main culprit when it comes to carbon-based fuel sources.

Since its establishment in 1923 as the Electricity Supply Commission, Eskom has provided power to SA primarily through its coal-fired power stations. It has been able to meet energy demands due in part to the country’s 11% global share (the sixth-largest) of recoverable coal reserves, estimated at more than 30-billion tonnes, representing 3.5% of the world’s coal resources.

This seemingly infinite coal reserve powered SA’s economic and industrial development throughout the 20th century, a period in which environmental considerations of the impact of greenhouse emissions from coal-fired steam locomotives and coal-fired power stations were not considered cause for concern.

Today, various studies have demonstrated the adverse effects of greenhouse emissions on climate change, the natural environment and the estimated damage its projected impact in the future. The emergence of global green/environmental movements and UN concerns more than the impact of greenhouse emission on climate change have put pressure on developing countries, including SA and its reliance on coal-fired power stations, to reduce pollution.

This has led to compelling legitimate arguments advancing a position that such demands mean holding back development for emerging economies. Inevitably, the coal-mining industry throughout the world is facing enormous challenges concerning survival and legitimacy as a result of calls for the replacement of fossil fuels with renewable energy sources for electricity generation.

Eskom remains our largest source of greenhouse emissions, due to generation of as much as 85% of the electricity consumed by the nation from coal-fired power stations. Eskom’s history of consuming millions of tonnes of coal every year means that industry’s survival is predicated on the utility’s ability to burn the coal at its power stations, while limiting greenhouse gas emissions to meet global standards and SA’s international commitments. There are long-established mechanics of economic demand and supply.

On the economics, coal remains one of our largest mineral exports by value, accounting for R139bn in 2019. Loss of this revenue is frequently invoked as a risk to the SA economy as the world moves away from coal. This requires pragmatic consideration since the state also benefits significantly through taxes and royalties associated with coal mining.

In addition to the economics, the coal-mining sector employed more than 92,000 people in 2019, and Eskom employs an additional 50,000 or so in its fleet of coal-fired power stations. In Mpumalanga, where most of SA’s coal-fired power stations are located, mining accounts for 6.7% of total employment, and that does not take into account the multiplier effects.

While coal is  set to continue dominating the power generation mix, renewable energy generation from wind, solar photovoltaic, concentrated power and other sources is set to constitute about 20% of SA’s total installed generation capacity by 2030.

If the global demand for coal declines, as expected, it would not only cut into the country’s export earnings but will be accompanied by associated adverse effects on the current unemployment outlook. It would also complicate matters socially and politically in SA as the underlying causes of job losses have to be explained as a consequence of compliance with international calls to reduce greenhouse emissions.

In the present economic circumstances the prospects for alternative job creation opportunities to absorb thousands of those employed in the coal value chain do not look good. Such prospects need to take into consideration the level of formal education of those working in the coal industry, their specific technical skills, and the extent to which such skills are transferable.

In early 2017 Eskom announced the looming closure of five of its coal-fired power stations: Hendrina, Kriel, Komati, Grootvlei and Camden. Thus, the employment effects of the energy transition, and in particular its effects on existing workers, is of utmost importance. Our transition from coal has to be just and managed responsibly, guided by the national interest.

This must be within the context of ensuring the continuity and stability of the national grid and associated employment guarantees. The reality is that the rationale for sustaining our reliance on coal as a source of energy based on the competitive advantages of our reserves remains compelling.

Luvhengo is executive director of black-owned mid-tier coal producer Ndalamo Resources. Dr Tshitereke is researching the potential socio-economic impact of reducing SA’s reliance on coal-fired power stations.